In our latest episode, we had the pleasure of interviewing Jillian Sidoti, a powerhouse in helping real estate investors structure deals and raise money. Jillian shared her journey from being a real estate investor to becoming a lawyer focused on guiding others through the complex process of crowdfunding and syndication.
Meet Jillian Sidoti
Jillian Sidoti has been aiding real estate entrepreneurs since 2007. She transitioned from being an investor herself—struggling to raise money the right way—to guiding others on how to structure their deals legally and effectively. Drawing from her own experiences, she offers invaluable insights into financing real estate endeavors beyond just relying on the bank.
The Basics of Syndication and Crowdfunding
Syndication usually involves pooling money from multiple investors to fund a single asset, such as a multifamily property. Crowdfunding, on the other hand, can encompass a broader range of funding strategies, often facilitated through online platforms, and may involve both equity and debt investments.
Equity Crowdfunding Explained
Equity crowdfunding allows individuals to invest in a project in exchange for ownership stakes. Unlike donations or rewards-based crowdfunding, investors expect a financial return. Jillian emphasizes the importance of understanding the legal requirements and implications of using such methods.
Key Legal Points to Consider
When raising money from investors, it’s crucial to be compliant with securities laws. Jillian outlined a simple test to determine if you’re dealing with securities:
- Are investors putting in money?
- Are they expecting a return?
- Is there more than one investor?
- Are the investors passive while you actively manage the deal?
If you answered “yes” to all four questions, you need to ensure you’re following securities regulations.
Building Trust with Investors
A recurring theme in our conversation was the importance of trust. Jillian pointed out that trust outweighs returns when it comes to attracting investors. People are more likely to invest based on their trust in you rather than the potential returns alone. She shared a great example involving one of her clients who built trust by providing clear and honest communication—the result was additional investments from an already convinced investor.
Controlling the Deal
Jillian stressed the importance of controlling the terms of your deals. You should set the returns, distribution schedules, and reporting mechanisms. Clearly defined terms prevent unnecessary back-and-forth and ensure that investors know exactly what to expect.
Tips for Raising Funds
- Start Small: If you’re new to raising funds, consider starting with a 506(c) offering. It allows you to solicit accredited investors without the full complexity of a Regulation A offering.
- Know Your Numbers: Always know what you need to make a deal worthwhile for you. From there, determine what you can offer your investors.
- Be Transparent: Provide all necessary disclosures to your investors. Honesty can build trust and lead to more investment opportunities down the road.
Getting the Right Paperwork
Proper paperwork is non-negotiable. The key documents include:
- Private Placement Memorandum (PPM): Details the investment and risks.
- Operating Agreement: Defines how the LLC will be managed.
- Subscription Agreement: Outlines the agreement between you and your investors.
- Form D Filings: Notify the SEC and state securities boards of your offering.
Takeaway
Leveraging other people’s money (OPM) can significantly amplify your real estate investment returns while mitigating personal financial risk. Hard money lending offers a powerful tool for investors to maximize their projects’ potential, with lenders like Bay Mountain Capital providing flexible and accessible options. Additionally, understanding the intricacies of real estate syndication and crowdfunding, as expertly discussed by Jillian Sidoti, can open new avenues for funding your deals.
Whether you’re a seasoned investor or just starting out, building trust with investors, maintaining transparency, and controlling your deal’s terms are essential steps to successful real estate investment. With the right strategies and partners, the world of real estate investing holds vast opportunities for those willing to dive in and make the most of OPM.
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